Working on a strip mall where the landlord pays master electric bill then sub-meters to tenants. Found $4,300 in overcharges but now there's a dispute over who gets the refund - the landlord who paid the bills or the tenants who ultimately bore the cost through rent. Contract language wasn't clear on this scenario. How do you handle master-metered commercial properties?
Strip mall billing nightmare - who's responsible?
This is why I avoid master-metered properties unless the ownership structure is crystal clear upfront. Legally the refund goes to whoever has the account with the utility, but ethically it should go to whoever actually paid the inflated costs. Usually ends up in court unfortunately.
I've seen lease agreements that specifically address utility billing errors and how refunds are handled. But most don't cover it. My standard contract now includes a clause requiring client to resolve any third-party payment disputes before I start work.
The business relationship between landlord and tenants is separate from your audit contract. Focus on getting the utility company to issue the refund to your client (the account holder), then let them sort out any pass-through obligations per their lease terms. Document everything in case you get pulled into their dispute later.
Thanks Randy, that's the approach I'm taking. Utility issued refund to landlord as account holder. Now landlord and tenants are working out the split based on their lease language. I'm staying out of that mess.